Romney's health care alternative: subsidies, block grants

Michael Corey, right, a supporter of the Affordable Care Act, is challenged by opponents at an Americans For Prosperity Colorado rally in Denver on Friday.

Photo: Kathryn Scott Osler

Mitt Romney has pledged to stop "Obamacare" on Day 1 if he wins the White House. But what comes next?

With the Supreme Court on Thursday upholding President Barack Obama's health care law, Romney faces increased pressure to flesh out alternatives to the law that he and other Republicans despise.

Although Romney has repeatedly hammered his opposition to a federal mandate to buy insurance - a crucial provision of Obama's law, modeled on a mandate Romney enacted as Massachusetts governor - he has devoted less time to describing his own health policies.

But in a handful of speeches in the past year he has made clear that he favors tax breaks, increased competition and devolving decisions to states to make health care more affordable, proposals that reflect a consensus on health policy that has solidified in the last decade among Republicans.

One of Romney's chief proposals could shake up how the vast majority of Americans now get their health care - through their employers. He would give a tax break to people who buy insurance individually on the open market, so they would enjoy the same advantage as workers who get insurance as a fringe benefit at work, which is not taxed as income.

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New Adelson contribution: Casino billionaire Sheldon Adelson is making another huge campaign contribution aimed at electing Republicans and voting President Barack Obama out of office. Adelson is donating $10 million to the campaign activities of billionaire brothers Charles and David Koch. He has already contributed $10 million to a super political action committee that backs likely Republican presidential candidate Mitt Romney. From wire reports

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'Good direction'

Aides to Romney said tax parity would introduce more consumer awareness of the costs of health insurance, and competition among insurers would cut costs.

A tax incentive to buy insurance "has the potential to be significant," said Lanhee Chen, Romney's policy director. "It can be something that really moves our health care system in a good direction."

Democrats warn that under such a system fewer employers will choose to offer health insurance, and older and sicker workers will be thrown into the market for individual insurance they cannot afford.

When Sen. John McCain proposed in 2008 to offer a $5,000 tax credit to families for health insurance, independent analysts estimated that the ranks of the uninsured would rise by 1 million to 21 million people.

To make insurance affordable for low-income people or the chronically ill, Romney would encourage states to experiment with high-risk pools, offering subsidies to the poor and insurance-buying exchanges - in essence, harnessing the purchasing power of large groups.

Obama's law currently encourages states to establish similar exchanges, a page taken partly from a successful exchange in Massachusetts created by Romney. But as the presumed Republican presidential nominee, Romney opposes a federal requirement that all states follow the Massachusetts example. Many state legislatures have resisted creation of health insurance exchanges.

Still, one of Romney's top advisers, Michael O. Leavitt, the former secretary of health and human services, has advised a half-dozen states about how to set up exchanges.

"An exchange can greatly expand the number of insurance choices available to employees of small businesses," said W. Brett Graham, a partner in Leavitt's health care consulting business.

One of the most ambitious changes Romney would enact is to transform Medicaid, which insures more than 50 million poor and disabled Americans, into a program of block grants, or lump-sum payments, to states. Grants would be capped to rise at the Consumer Price Index plus 1 percent a year.

The block-grant system Romney supports is similar to a proposal in the House Republican budget crafted by Rep. Paul D. Ryan of Wisconsin in an effort to slow rapid growth of the program.

No kids-under-26 plan

Democrats argue that turning Medicaid into a block-grant program with a cap would force states to cut many vulnerable people from the rolls or reduce services.

Much of the mechanism to expand coverage to the uninsured under Obama's health care law was to come in the form of extending Medicaid to millions of uninsured low-income adults. But the Supreme Court ruled Thursday that states can refuse to expand their Medicaid rolls under this initiative, without losing the federal payments that currently contribute 50 percent or more to their programs.

Romney would not maintain two of the most popular provisions of Obama's law - letting children under 26 stay on their parents' health insurance and prohibiting insurers from denying coverage to first-time customers with pre-existing medical conditions. Romney does say that he would guarantee coverage for people with pre-existing conditions if they have been "insured in the past."

Several insurers have already announced that they would continue to allow young adults to remain on their parents' plans.